A property has an ad valorem value of $475,0000 in a state that requires a 50% assessment ratio (Texas's assessment ratio is 100% but let's use 50% to make it interesting). The property owner qualifies for two exemptions. First, the owner qualifies for a homestead exemption of $25,000. Second, the owner also qualifies for an additional $12,000 exemption because she is over the age of 60. The property tax rates for the jurisdiction are as follows:
County tax 4 mills
School district 11 mills
Hospital 2 mills
Fire department 1 mill
Total tax rate 18 mills or .018 (18/1000)
STEP 1: Calculate the assessed value.
Ad valorem value x assessment ratio = assessed value
$475,000 x .50 = $237,500
STEP 2: Calculate the taxable value.
Assessed value - exemptions = taxable value
$237,500 - ($25,000 + $12,000) = $200,500
STEP 3: Calculate the property tax due.
Taxable value x millage rate = property tax due
$200,500 x .018 = $3,609.00
In addition the property tax due, it would also be useful to know the tax savings from the exemptions and also the effective tax rate.
STEP 4: Calculate the tax savings from exemptions.
Exemptions x millage rate = tax savings from exemptions
$37,000 x .018 = $666.00
STEP 5: Calculate the effective tax rate. The effective tax rate is the ratio of the property tax to the ad valorem value.
Property tax due $3,609.00
Effective tax rate = Ad valorem value = $475,000 = 0.0076 or .76%
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